CDFI credit unions seeing a light at the end of the ‘pause’ tunnel
Even though the U.S. Treasury Department’s Community Development Financial Institutions Fund is still pausing its acceptance of new CDFI Fund certification applications, a handful of credit unions that had already applied have been approved. These are some of the first approvals in about a year CU Strategic Planning, a leading CDFI consultancy serving credit unions, had heard of.
The Credit Union Connection learned of eight credit unions that have been approved as CDFIs so far in 2023, and Kitsap Credit Union announced that it has been approved for a $660,000 financial award from the CDFI Fund. Congratulations to these newly minted CDFI credit unions!
• Muskogee FCU
• TrueCore FCU
• SMW 104 FCU
• Pacific Crest FCU
• Baton Rouge Telco FCU
• Palmetto Citizens FCU
• Orlando CU
• Rogue CU
While the Treasury’s CDFI Fund hasn’t accepted any new applicants for CDFI certification since October 2022, CDFI credit unions and hopefuls are starting to see more communication. The eight CU Strategic Planning clients listed above had been waiting on their certification decisions since before that pause.
What it means to be a CDFI credit union
Certified CDFI credit unions have a proven track record of serving low-income communities and people who lack access to financing. CDFIs are eligible to receive financial awards from the CDFI Fund for a variety of projects surrounding financial inclusion, women’s empowerment, household stabilization, affordable housing and rehab, and more to support economically depressed and minority communities.
CU Strategic Planning previously announced that its clients comprised 56% of all this year's CDFI Financial Assistance awards granted to credit unions, totaling $26.97 million. In total 233 CDFIs, including 72 credit unions, earned awards totaling $144.7 million in FA grants.
Kitsap Credit Union, which received its CDFI certification in January 2022, announced it received $660,000 financial award from the CDFI Fund just a bit ago. The credit union’s goals are to help financially educate and support their community topromote a healthier local economy.
“Now that we have been awarded this grant, our credit union will begin to develop plans to allocate the CDFI grants,” Kitsap Credit Union CEO Shawn Gilfedder said. “We are looking to expand our services and products for the underserved populations in our communities, including women’s entrepreneurship and the indigenous population.”
Another credit union that was recently certified had to goal of serving more underserved areas, particularly the burgeoning Hispanic population in its part of Oklahoma. The credit union already began offering ITIN loans and had made three so far in 2023, but with the award, the credit union plans to make 800 more loans over the next three years, split between 150 affordable auto loans to compete with buy-here, pay-here car dealerships and 650 small dollar and debt consolidation loans.Basically, the credit union is looking to bring local residents into the credit union lending light and save them from unscrupulous lenders who often prey upon the most vulnerable.
Very often, CDFI credit unions use the financial assistance awards, paired with financial counseling, to help cushion expected increased losses that typically comes with riskier lending.
CDFI credit unions earn additional funding opportunities
On top of the (usually) annual CDFI Fund Financial Awards and a few other niche programs, CDFI credit unions also can gain access to special programs, like the CDFI’s Equitable Recovery Program. Just yesterday, the CDFI Fund awarded more than $1.73 billion to 603 CDFIs across the country through the CDFI Equitable Recovery Program. More than one-third (203) of the grants went to CDFI credit unions.
“We are ecstatic to see 93% of the credit unions we assisted in applying for ERP funds receive this funding, which will provide the opportunity to improve the lives of even more people in need,” CU Strategic Planning CEO Stacy Augustine said. “With the more than $139 million in awards they received through the ERP, over the last 15 years we’ve assisted credit unions in earning $945 million – nearly $1 billion! – to serve historically underserved areas.”
The ERP funds were specified by the CDFI Fund to strengthen the ability of CDFIs to help low- and moderate-income communities recover from the COVID-19 pandemic and invest in long-term prosperity. A complete list of all award winners is available at the CDFI Fund website.
CDFI credit unions and other CDFIs must deploy the ERP fundsin designated eligible areas, which are census tracts that demonstrate severe impact from the COVID-19 pandemic, have a median income at or below 120% of the area median income, and are CDFI investment areas, or Native areas.
“Knowing the CDFI Equitable Recovery Program from the U.S. Treasury believes and supports Calhoun Liberty Credit Union’smission in supporting economically challenged rural communities is priceless,” CEO Thomas Flowers said. “This funding will only strengthen our efforts to help bring financial services to rural underbanked individuals. Calhoun Liberty Credit Union does its best every day to improve the financial lives of everyone we interact with each day. This funding will be life changing in so many ways.”
The CDFI Fund’s ERP was created to 1) provide funding to CDFIs to expand lending, grant making and investment activities in low- or moderate-income communities and to borrowers that have significant unmet capital and financial services needs and have experienced disproportionate economic impacts from the COVID-19 pandemic, and 2) enable CDFIs to build organizational capacity and acquire technology, staff, and other tools necessary to accomplish the activities under a CDFI ERP Award. Awards granted across all recipients ranged from $500,000 to $6.2 million, although when the program launched it was announced they could have reached as much as $15 million to an individual CDFI.
“This is the largest single grant program we’ve ever worked on, and I’m so proud of our credit unions and our team for the hard work it took to get to this point,” CU Strategic Planning Chief Experience Officer Mike Beall said. “Now the real, life-changing work begins. I can’t wait to see what’s next for our credit unions!”